Interstate Bakeries Warns Report Could Be Critical

Published: August 31, 2004

The Interstate Bakeries Corporation, maker of Wonder bread and Hostess Twinkies, said yesterday that its auditors' report might raise questions about its ability to continue as a going concern. The company's shares tumbled more than 42 percent.

The company also said that it had hired the crisis management firm Alvarez & Marsal.

Interstate said that its annual report would be delayed again because of uncertainty over compliance with debt covenants for the 2005 fiscal year and over its coming financial results. The company also cited data entry and training deficiencies in its new financial reporting systems.

Its filing with the Securities and Exchange Commission had been scheduled for release earlier in August. But it had been postponed until last Friday because of delays in completing the company's 2004 statements after a previously announced investigation into the way it set certain reserves.

Interstate said that if its report contained a paragraph questioning its ability to continue as a going concern, or if it failed to file a report by Sept. 26, it might not be able to borrow money under its senior secured credit facility.

The company said that if it did not have appropriate agreements with lenders to avoid such circumstances, it would need to consider alternatives.

Interstate Bakeries, based in Kansas City, Mo., has been hurt by falling demand for bread and pastries because of the popularity of low-carbohydrate diets, and questions about how it accounted for workers' compensation.